.Asean's Saxena reveals toxic convict Ahmad in Austrian fiasco
Asean Holdings Inc AHI
Thursday June 27 2002 Street Wire
by Brent Mudry
Controversial financier Tariq Ahmad of Reno, Nev., is the latest figure named by fugitive Thai financier Rakesh Saxena in the $1-billion collapse of General Commerce Bank SA in Austria last year. (All figures are in U.S. dollars.) In a statement of claim filed Wednesday in the Supreme Court of British Columbia, Mr. Saxena and one of his offshore holding companies seek $15-million in damages against Mr. Ahmad.
The named plaintiffs are Mr. Saxena and Marcala Foundation, based in the secretive enclave of Vaduz, Liechtenstein. Marcala is described as a "financial consulting firm specializing in the structuring of equity and debt hybrid transactions." The allegations in the suit, filed by Vancouver lawyer Stewart Andree, have not yet been proven in court and a statement of defence has not yet been filed by Mr. Ahmad, the sole defendant.
The current suit follows a $10-million suit Mr. Saxena filed Feb. 18 against Raoul Berthaumieu of Belgium, the front man in the collapse of General Commerce Bank, a fraudulent bank linked to international boiler room operations. The new suit claims Mr. Ahmad worked closely with Mr. Berthaumieu and helped raise $200-million in illicit proceeds from shares of penny stock shells originally related to Mr. Saxena. According to Mr. Saxena, Mr. Berthaumieu and Mr. Ahmad met in jail in California close to a decade ago.
The General Commerce Bank fiasco, in which Mr. Saxena claims he was a major victim, is a significant setback for the Indian-born financier, himself a alleged key player in the $2-billion fraudulent collapse of Bangkok Bank of Commerce in 1996. Mr. Saxena, charged in the BBC case along with close associate Adnan Khashoggi, the Saudi Iran Contra figure, is currently fighting an extradition order from Vancouver, where he lives under self-financed $375,000-a-year house arrest in a luxury waterfront condo close to Howe Street, an international centre of penny stock dealings.
The breadth of Mr. Saxena's global finance contacts is remarkable. Last August, Stockwatch revealed the fugitive Thai financier was linked to John Douglas Reynolds, the former Howe Street promoter turned prominent Canadian politician. In numerous contacts, Mr. Saxena tried to help Mr. Reynolds work out a whopping $484,000 (Canadian) debit the politician left at Vancouver brokerage Global Securities. Mr. Reynolds's debit stemmed from a block of WaveTech Networks Inc. shares he bought after he joined the board of the Canadian penny stock promotion, a Saxena shell.
Despite the unflattering ensuing publicity, including a lead front page story in The Vancouver Sun, entitled "The Politician and the Fugitive," the controversy hardly hurt Mr. Reynolds's political stature. Mr. Reynolds, then the No. 2 man of Canada's official opposition party, propping up fast-fading Canadian Alliance leader Stockwell Day, went on to become Canada's official interim opposition leader when Mr. Day resigned, and remains a prominent figure in the reformist party, personnally attacking Prime Minister Jean Chretien over a series of government corruption scandals.
The current Saxena suit claims Mr. Saxena, his Vaduz-based Marcala and Mr. Ahmad did business with Mr. Berthaumieu, the chairman and authorized signatory of General Commerce Bank and the managing director of Pacific Federal SA, the banker's lawyer-wife Sylvie Sainlez and another offshore bank, IBL Investments Bank Luxembourg.
"Ahmad at all material times and on various material occasions, fraudulently represented himself to be a director and significant shareholder of numerous noteworthy public companies in the United States which owned substantial assets in the United States and mining operations in Pakistan," states the suit. "At a material time Berthaumieu and Ahmad as an accomplice, and each together, offered a number of negotiable instruments, which they knew to be fraudulent, to the plaintiffs and each as genuine banking transactions."
A brief review of regulatory filings shows Mr. Ahmad has kept a relatively low profile in the penny stock world, apparently generally keeping his name off filings with the United States Securities and Exchange Commission. He is, however, linked to current promotions on the barely regulated pink sheets market: Pacific Energy and Mining Co. and Pacific Star Technology Corp. Both companies use the Reno address shown for Mr. Ahmad in the Saxena suit. While Mr. Ahmad is not readily apparent in Pacific Star, the company also uses the same phone number as Pacific Energy, in which he is a player.
Pacific Energy has a curious asset mix, even by penny stock standards. In a Jan. 8 press release, showing Mr. Ahmad as the company contact, Pacific Energy claims it owns interests in broadband services, telecommunications and natural resources. In addition to claiming control of properties in the U.S. Rockies with four million tons of chrome ore and seven million tons of magnesite, Pacific Energy says it has established "high-quality, long-life oil and gas reserves." The tiny company claims it is "focused on Growth, Value and Performance as it builds a Super-Independent natural resources company."
In the press release, Pacific Energy claimed the completion of its private cable network in Reno, operated and owned by Satview LLC, in which Pacific owns a 50-per-cent stake. Mr. Ahmad claimed the private cable network provides broadband services, including television and high-speed Internet, to "high end Multi Dwelling Unit customers," and Pacific expected 90 per cent of the residents would sign up for television service by March, a phenomenally fast and high level of penetration. Mr. Ahmad claims Satview also has properties in California, Colorado and Nevada, and it projects to sign up 40,000 subscribers by the end of this year.
Mr. Ahmad has quite a history in California -- in fact, he has been a distinguished guest of the exlusive gated communities run by the state's department of corrections.
Mr. Ahmad's international entrepreneurial talents were first publicly recognized in November, 1990, when he was arrested in Reno, at age 30, on charges of illegally shipping 75 containers of hazardous waste from a Los Angeles-area laboratory to Pakistan. According to the Los Angeles County district attorney's office, Mr. Ahmad had been ordered by county health officials to get rid of hazardous chemicals in 1989 after a fire consumed his company, Shankman Laboratories.
"Prosecutors said Ahmad sent the chemicals to a company near Los Angeles International Airport to be shipped to Pakistan. During unloading, the chemicals spilled, prompting evacuation of 75 workers. The spokesman said Ahmad failed to property package the chemicals, and the Pakistani government sent them back," reported the Los Angeles Times. Federal prosecutors claim Mr. Ahmad paid $1,800 to illegally export the mislabeled toxic trove, instead of spending $80,000 to have the waste disposed of properly.
"Ahmad intended to dump the 27 55-gallon drums of hazardous waste down mine shafts in Pakistan owned by Ahmad and his family. This hazardous waste, which included cyanide, mercury and arsenic, if dumped in the ground, would severely contaminate underground drinking water supplies and seriously endanger human health," Assistant United States Attorney Stephen Mansfield told the press.
This was just the start. Mr. Ahmad was named as the key player in a federal grand jury indictment unsealed March 16, 1992, in U.S. District Court for the Central District of California. In addition to the state's toxic-waste charge, the federal indictment charged Mr. Ahmad, his brother Mobashir Ahmad, and associate Rafar Asrar, with an arson conspiracy in which his Shankman lab was torched to collect $205,000 in a fraudulent fire insurance claim.
The grand jury indictment claimed the Nov. 30, 1989, torch job was staged to look like an accidental fire, and three weeks after the fire Mr. Ahmad shipped off the toxic waste from his lab. The torcher's toxic shipment made it from Los Angeles to Dubai, where it was intercepted after Pakistani intelligence had been tipped off. Mr. Ahmad was also charged with mail fraud and perjury, stemming from the grand jury probe.
Mr. Ahmad and Mr. Asrar were convicted April 15, 1993, of the toxic waste charges and charges of arson, arson conspiracy, mail fraud and perjury. Mr. Ahmad was also convicted of money laundering. Federal prosecutors called it the first ever jury conviction for the illegal transportation and exportation of hazardous waste.
Mr. Ahmad was subsequently sentenced on Aug. 9, 1993, to eight years in a federal prison, while Mr. Asrar was sentenced a month earlier to five years. The judge also ordered Mr. Ahmad to make restitution payments of $250,000 and to forfeit $200,000 to the federal government.
While for some, an eight-year prison term might mark the end of a promising entreprenurial career, for Mr. Ahmad it was just the start.
In the current suit, Mr. Saxena claims he heard distressing news six months ago. "In December, 2001, the plaintiffs were informed that Pacific (Federal) was not allowed to engage in securities transactions under the laws of its country of incorporation, Belgium, and that Ahmad and Berthaumieu had developed their conspiratorial association while serving jail time for serious California convictions which actually bared (them) from performing many of the public company related activities."
Mr. Berthaumieu, who used the alias Lee Sanders then and now, had the misfortune of being convicted in 1991, when he pleaded guilty to felony bank fraud for writing $1.6-million in rubber cheques. The Belgian-born Canadian national, then 46 and living in the Los Angeles suburb of Woodland Hills, was arrested on a sealed grand jury indictment in June, 1990, in Melbourne, Australia, a credential few other bank chairmen can boast of.
California's prison system actually deserves full credit as the spawning ground for the General Commerce fiasco in Austria years later. According to Mr. Saxena, at least three other key General Commerce figures were in jail in California in the early 1990s.
"Sherman (Mazur) met Raoul (Berthaumieu) in jail," says Mr. Saxena, who knows quite a bit about the General Commerce Bank players.
Mr. Mazur, then 43, capped a lengthy criminal investigation in July, 1993, when he pled guilty to seven counts of bankruptcy and tax fraud in federal district court in the United States District Court in the Central District of California in Los Angeles. The guilty plea came less than a week before he was to face the start of a trial on 74 fraud-related criminal charges.
The highflying financier, who boasted a fleet of eight or nine luxury cars including a Ferrari and two Rolls-Royces, was prosecuted for milking and bilking many of the 200 real estate limited partnerships he headed. Mr. Mazur's veneer of respectable success peeled away after he was indicted in 1991.
On Dec. 1, 1993, U.S. District Court Judge Ronald Lew sentenced Mr. Mazur to six years in prison and a $250,000 fine. (This was on top of the $500,000 restitution the fraudster agreed to in his plea negotiations.) Prosecutors called the Mazur saga one of the largest cases of tax fraud at the time. Mr. Mazur "should be punished for the greed he has shown," Assistant U.S. Attorney Maureen Tighe, the lead prosecutor, told Judge Lew.
The jailhouse legend is even richer. According to Mr. Saxena, while Mr. Mazur and Mr. Berthaumieu spent several years together in California, they also met a chap in jail who later became General Commerce Bank's representative in London. "It is stranger than fiction," says Mr. Saxena, whose courtroom opponents might suggest he is indeed an expert on the subject of fiction.
Mr. Mazur, Mr. Berthaumieu, Mr. Ahmad and their London associate were not the only General Commerce Bank key players to learn a thing or two in jail. Regis Possino, who still lives in the Los Angeles area, was convicted in 1978 in an entertaining drug sting, sentenced to one year in jail, and disbarred in 1984. The budding young lawyer had offered to sell half a ton of pot and $5-million worth of stolen bonds to undercover agents.
While Mr. Possino has been quite active in controversial penny stock promotions in recent years, Mr. Saxena claims he was outranked by Mr. Sherman in the behind-the-scenes structure of General Commerce Bank. "Sherman is the main player; he is the front guy," Mr. Saxena told Stockwatch. "Berthaumieu reported to Sherman, not to Regis."
In the latest suit, Mr. Saxena traces his unfortunate General Commerce Bank dealings back to November, 2000. "Berthaumieu requested the plaintiffs to conduct highly specialized investment banking services for GCB and Pacific (Federal) offering to pay the customary fee and commission of between 5 per cent and 12 per cent of the face value of each transaction."
The suit claims that in December, 2000, Mr. Saxena and his Vaduz holding company, relying on the representations of Mr. Berthaumieu and his lawyer-wife Ms. Sainlez, structured a $100-million convertible loan transaction between a major Turkish steel producer and General Commerce Bank.
This is where it gets really interesting. "On or about May, 2001, Berthaumieu arranged that GCB make and deliver a $1-million (US) GCB promissory note to the order of a Canadian resident and his U.S. corporation in return for the right to acquire, for merger purposes, four U.S. shell companies," states the suit. The court filing notes Mr. Saxena and Marcala, his Vaduz company, arranged these transactions and were entitled to a fee and commission.
Unfortunately, Mr. Saxena later found he was victimized. "On or about May 2002, the plaintiffs received evidence that Berthaumieu, without informing Saxena and without completing purchase of the within U.S. shell corporation, clandestinely sold shares in one or more of the shell corporations to European investors and converted the proceeds (approximately $200-million US) to himself and his accomplice Ahmad," states the suit.
The suit also claims that last July, Mr. Berthaumieu and Ms. Sainlez arranged for General Commerce Bank to make and deliver GCB promissory notes "to the order of two U.S. corporations" with a dollar value exceeding $27-million in order to acquire majority shares in an American public company and to purchase a business to be merged into this listed company.
The busy bankers had much more on the go. "On or about July-August 2001, Berthaumieu requested the plaintiffs to arrange that Pacific (Federal) purchase two U.S.-based broker-dealers," states the suit. The court action claims that while Mr. Berthaumieu negligently failed to close the purchase of these two unidentified brokerages, substantial fees and commissions were due to Mr. Saxena. The suit claims that to compensate for these fees and commissions, Mr. Berthaumieu signed some agreements.
"On or about August 13, 2001, Berthaumieu, Sainlez and Ahmad arranged the issuance of promissory notes (Face Value $40-million U.S.) made by Eurolinks Ltd. (a nominee corporation purported to be owned by Berthaumieu and Ahmad) which relied, for security purposes, upon the businesses purportedly controlled and owned by Ahmad in the U.S. and in Pakistan," states the suit.
Mr. Saxena claims his lucrative fee deals began unravelling between last September and December, when he discovered that Mr. Berthaumieu was never authorized to act on behalf of General Commerce Bank, which rendered the promissory notes just worthless paper. It got worse in January, when Mr. Saxena claims he discovered Mr. Ahmad was never authorized to transact the assets linked to the promissory notes and that Mr. Ahmad did not exercise any recognizable control over the subject assets.
Mr. Saxena and Marcala, his Vaduz company, now seek damages of $15-million after this distressing experience of high-level deception.
bmudry@stockwatch.com
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